Are you thinking of setting up your own business in the United Kingdom? If so, you are not alone.
As of this year, there are almost 6 million private businesses registered in the UK, with people from all over the world taking advantage of the fact that the UK is one of the most business-friendly countries on the planet.
Setting up a business in the UK is as simple as becoming a sole trader. But what does this mean, and what does it entail? Here’s everything you need to know about how to open a sole trader business in the UK.
Becoming a Sole Trader: The Basics
Let’s start by covering the basic terminology that anyone who wants to register a company in the UK needs to know. First off, the term ‘sole trader’ is essentially the same as being self-employed.
You are liable for your own business activities, don’t have an employer, and don’t pay tax via PAYE (Pay as You Earn).
Once you have registered, you can take on employees and still be registered as a sole trader. ‘Sole trader’ is simply a way of describing the structure of your business.
Getting Started
You can register a new business via the HMRC website. Simply create a tax account and click ‘register for self-assessment’. You will want to create a company first, which you can do via the Companies House website.
Before starting, you’ll also need a National Insurance Number and a business name. You’ll also need an idea of how much you will be earning, as all profits over £1000 per tax year will be taxed.
Make sure to pick a name that has not already been taken. Also, it is important to choose a business name that is not misleading or offensive in any way, as this can lead to penalties.
Becoming a sole trader is easy, can be done completely online, and doesn’t cost a penny.
Accounting and Tax
Whether you’re working alone or paying employees, you’ll need full records of all of your outgoings, profits, and wages. You can use simple online software to generate your pay stub, which can be used when you’re filling in all of your tax information.
It is vital to keep thorough financial records of your activities, as all of this will determine how much tax you will need to pay.
If you’re sole trading without employees, this will simply consist of the payments you have received and a list of expenses.
Special Permissions You Might Need
The sole trade route is usually easy, but depending on your type of business, you may need to apply for special permissions.
If your business is a restaurant, taxi driving operation, street vendor business, or involves working with children, you’ll need to apply for a license from the local authority.
If you do not have this license before trading, you will be penalized by the government.
Learn More
Becoming a sole trader is an easy way to be your own boss and enjoy the fruits of the UK’s booming business environment. Make sure to consult our business case studies section to see how the UK’s most successful companies do it.